Durbin gains key support for revitalized Internet sales tax bill

(Crains) — Sen. Richard Durbin rebooted his Internet sales tax bill, picking up crucial GOP support by exempting small online retailers and making it easier for states to comply.

Along with Sen. Mike Enzi, R-Wyo., and Sen. Lamar Alexander, R-Tenn., the Illinois Democrat wants to allow states to collect sales taxes from Internet retailers if they adopt one of two sales tax simplification options outlined in the legislation introduced Wednesday.

The bill addresses a legal loophole, created by Supreme Court decisions predating the Internet, which allows online retailers to avoid paying state sales taxes that brick-and-mortar stores must remit. As online sales soared at the expense of traditional retailers, states and cities have missed out on billions in tax revenues.

“We are not creating any new taxes in this bill,” Mr. Durbin said. “It's a mechanism to collect taxes that are already on the books.”

To avoid paying Illinois sales taxes, Amazon.com Inc. and other big retailers cut off local websites that had referred sales to them.

"In Illinois, we have taken important steps to ensure Main Street businesses are protected from an unfair climate. Once Amazon broke its ties in Illinois, the need for a federal solution became even more important. This legislation is another sign of momentum in support for leveling the playing field between online and brick-and-mortar retailers," said David Vite, President and CEO of the Illinois Retail Merchants Assn.

The bill is backed by Seattle-based Amazon.com, which has opposed legislation in Illinois, California and other states to collect online sales taxes because of the complexity created by a state-by-state approach.

“Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers and the states to get this bi-partisan legislation passed,” said Paul Misener, Amazon’s vice-president of global public policy, in a statement. “It’s a win-win resolution — and as analysts have noted, Amazon offers customers the best prices with or without sales tax.”

A research report by private-equity firm William Blair & Co. LLC shows that Amazon tends to have lower prices, especially on items priced higher than $20, than brick-and-mortar retailers.

Hoffman Estates-based Sears Holdings Corp. and other traditional retailers such as Bentonville, Ark.-based Wal-Mart Stores Inc. also back the measure.

However, eBay Inc. still opposes the legislation, according to a tally of supporters and opponents provided by a lobbyist for interests that favor it.

"This is another Internet sales tax bill that fails to protect small-business retailers using the Internet, and will unbalance the playing field between giant retailers and small-business competitors,” Tod Cohen, vice-president for government relations and deputy general counsel for the San Jose, Calif.-based online retailer, said in a statement. “It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity."

With the Washington, D.C.-based antitax group Americans for Tax Reform also opposed, it's unclear whether the bill has a chance in the tax-averse, Republican-controlled House. But supporters are optimistic.

With the changes made in the bill and bipartisan co-sponsors, “this is going to happen,” Mr. Alexander said. “I've been around long enough and observed Congress enough to say this is going to happen.”